Carbon accounting – beyond greenwash

THE coalition’s ambitious new carbon reduction targets will introduce sweeping changes that pressure organisations to better measure, manage, report and reduce their energy use and carbon emissions – and it’s no bad thing.

Leading companies already view energy efficiency, carbon abatement and environmental performance reporting as essential to their broader strategic goals in areas such as risk management, business continuity and business transformation.

Others have been spurred into action by shareholder agitation, the greening of large investment and pension funds, and the rising influence of initiatives such as the Carbon Disclosure Project and the UK’s Carbon Reduction Commitment Energy Efficiency Scheme (CRC).

Many organisations are cutting operational costs and boosting their green credentials by making targeted strategic investments in corporate sustainability programmes.

The discipline is not without its challenges, however. Carbon accounting is a significant administrative burden. It makes sense then that this is done accurately, methodically and in a way that can be reliably measured against other organisations’ performance, to maximise the reputational benefits and to ensure that all businesses are pulling their weight.

It is for these reasons that there has been a push for mandatory energy and carbon disclosure by bodies such as the Confederation of British Industry, which has called for greater scrutiny, consistency and transparency in corporate sustainability reporting.

Many organisations feel confused and burdened by the disparate demands of numerous carbon reporting regimes currently in operation. These include the Carbon Trust Standard, the Global Reporting Initiative (GRI), the Carbon Disclosure Project (CDP), and the government’s mandatory Carbon Reduction Commitment Energy Efficiency Scheme (CRC).

A recent report by Deloitte noted that more than 90% of listed UK companies fall short of Department for Environment, Food and Rural Affairs’ current carbon accounting recommendations. As few as 20% were able to report progress against specific emissions targets, while only one in a hundred had identified carbon as a designated business risk in its annual report.

This situation isn’t sustainable, however. The Department for Environment, Food and Rural Affairs (Defra) is in final consultation with business about the introduction of broader mandatory carbon reporting legislation due to take effect in 2013.

Four options are under consideration: enhanced voluntary reporting; mandatory reporting for all quoted companies; mandatory reporting for all large companies; and mandatory reporting for all companies whose UK energy consumption exceeds a given threshold.

Some 20,000 UK organisations currently qualify for the CRC Energy Efficiency Scheme, which is designed to contribute to the UK’s goal of reducing carbon emissions by 80% by 2050 from 1990 baseline levels.

Most of these organisations will only need to make an information disclosure once every few years about their electricity usage. However, some 5,000 organisations will be obliged to participate fully in the scheme, which aims to reward good and penalise poor energy and emissions performance.

The more carbon an organisation emits, the more allowances it has to purchase, so many organisations now have a clear financial incentive to measure, manage, report and reduce their emissions.

Aligning corporate and sustainability goals For carbon accounting to be more than an administrative expense to a company, organisations need to look for these additional ‘wins’.

This will mean aligning sustainability goals and practices with broader business strategy in areas such as cost reduction, increased efficiency, business transformation, risk management and business continuity.

As things stand, many organisations lack information about precisely how and where energy is being used across their operations, which may span numerous sites and geographic locations. Capturing more information could help trigger significant efficiency gains.

Organisations including Walmart, Target, Cisco, Campbell’s Soup, Hilton, Ford, Chrysler, General Mills, TXU Energy have reported saving tens of millions of dollars through initiatives such as using renewable energy, energy efficiency and recycling schemes. In the UK, Balfour Beatty has committed to a 2020 sustainability vision and roadmap targeting a minimum 10% decline in carbon emissions by 2012 – increasing to 50 per cent by 2020 against a 2010 baseline. It aims to achieve this by embedding sustainability in every aspect of the business – finance, procurement, supply chain, business development, design, human resources, project management and service delivery.

Can carbon accounting be anything more than a PR exercise? Without question – although this alone offers a significant differentiator while the playing field remains uneven. In its most basic form, formal carbon reporting is an expectation, soon to be enshrined in law. In its broadest application, it could be a powerful business tool, shining a light on whole areas of wasteful practice that may have been costing companies dearly.

Karl Campbell is head of sustainability, CarbonSystems UK

Related reading

Fiona Westwood of Smith and Williamson.